Profits Likely To Remain Elusive For Dropbox In 2018

Dropbox gave potential investors a detailed look at its financials last month when it filed for an IPO. Founded in 2007, the popular cloud storage company has yet to break even. However, the company’s losses have steadily declined over recent years – falling from over $325 million in 2015 to $111 million in 2017 – thanks to higher revenues from its enterprise offering, Dropbox Business.

While Dropbox’s revenues in 2018 should gain from increased adoption among business users, we believe that the marketing expenses needed to drive this growth will result in continued losses for the company for the year (with losses of around $50 million). That said, we expect that the company will turn profitable in 2019 (with a nominal profit) based on our interactive model for Dropbox, which details our estimates for the company’s revenues and expenses for 2018 and 2019.

Revenues Will Trend Higher As More Users Pay For The Service

We forecast Dropbox’s revenues using three metrics: the number of active users, proportion of paying users and revenue per paying user. While Dropbox’s easy-to-use cloud storage service will continue to attract new users, we also expect the company to do well among business users – something that will drive revenues higher.

Trefis

As the number of business users is expected to grow at a faster rate than Dropbox Plus users (individuals who pay a subscription fee for additional features), and as the fee per user for Dropbox Business is much higher than that for Dropbox Plus, this will lead to a steady increase in the average revenue per paid user, as captured in the chart below. Taken together with more paying users, this points to sizable growth in revenues for Dropbox over 2018-2019.

Trefis

Increased Competition Will Require Additional Spending To Attract New Customers